RBI needs to widen the scope of the Depositor Education and Awareness Fund Scheme to borrowers as well as they probably need more education than depositors to make banking systems stronger
The Reserve Bank of India (RBI) is planning to mobilise funding under its ‘Depositor Education and Awareness Fund Scheme’ (Fund). The crux of the scheme is to educate depositors by utilising money in inoperative deposit accounts of bank depositors. The RBI press release says, ”The Fund will be created by taking over inoperative deposit accounts which have not been claimed or operated for a period of 10 years or more or any deposit or any amount remaining unclaimed for more than 10 years within a period of three months from the expiry of the period of 10 years. The Fund shall be utilised for promotion of depositors’ interest and for such other purposes which may be necessary for the promotion of depositors’ interests as specified by the Reserve Bank from time to time.”
It is important to note that the depositor will have the right to claim from her bank the deposit or operate her account after the expiry of 10 years, even after the unclaimed deposit funds have been transferred to the Fund. Bank would be liable to pay the deposit amount to the depositor and claim refund of such amount from the Fund.
There is no doubt that attempts should be made by the regulator to educate depositors but only educating depositors in not enough. There are other entities availing banking facilities, which needs to be brought under the scheme to make banking system stronger. RBI has mentioned that members of the public, banks, academia, industry and other stakeholders may send their comments on the scheme by email by 5 February 2014.
I wish to suggest the following to the RBI with respect to this fund:
1) Widen the scope of the fund and don’t just keep it confined to the depositors even if it is created with unused money of depositors in the bank account. The borrowers also need education and probably need education more than depositors to make banking systems stronger.
2) It would be a great idea to use these funds to provide more resources to Banking Ombudsman both in term of human resource and other supporting resources to ensure that depositors’ grievances are heard and managed in a better way. There is a need to increase the scope of coverage of banking ombudsman scheme.
3) As proposed by RBI, there will be a committee to monitor funds mobilised under the scheme. In the process of management of money mobilised under the scheme, the committee will register institutions, which in turn will be responsible for depositor’s education. The draft document says, “For the promotion of depositors’ interests, the Committee may register/recognise from time to time various institutions, organizations or associations, engaged in activities relating to depositor awareness and education, including those proposing to conduct programmes for depositors of banks, organizing seminars and symposia for depositors and undertaking projects and research activities relating to these areas”. While it is fair to do this, the RBI should ensure that there should be a banking partner for all such programmes and representatives of the banks should directly interact with the depositors.
4) The focus of these programmes should be in remote areas where depositors and other bank clients very rarely get an opportunity to get information and education on banking services.
5) As per the proposed Fund (scheme), Banks shall repay the customer/ depositor, along with interest if applicable whenever the depositor makes a claim of her money. There should be a time frame defined for this and it should not be more than a week.
6) Any deposit account opened and operated by senior citizens should be monitored separately for this scheme. Since senior citizens may get inconvenienced by transfer of money from their account even after 10 years, it is required that they should be served sufficient notice for cases where money is going to get moved out of their account.
7) The investor education program should not be mere pep-talk but should give depositors an opportunity to understand how to handle the issues that they may face in the process of using banking services.
8) Create a central repository of updated information on depositor’s right. The free online access should be available to the depositor including the bank where he holds account. This repository should also provide escalation matrix in a bank.
(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)
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After all the deposit or account belongs tho depositers and as banker its morale responsibility to call the depositer and inform that account is inoperative for more than 10 years and what are going to do and as such we request that this fund should not be misused and this would lead to another money laudering this fund should not be touchwed how provident fund unclaimed is kept intact similar procedure should be followed is my opioion after all this hard earned moeny of depositers this should be left untocuhed is my suggestion
Secondly, it is the duty of all the providers of goods and services to educate and inform their consumers on the consumption - how and in what manner the banking and other financial services to be best used.
I have not seen the press note of the RBI which I would like to go through if Moneylife could help me locate.
But, there is also an urgent need to educate the bankers on the aspect of their sacred role as protectors of "SAVERS" money and it is also their obligation to adequately compensate the "SAVERS" on account of their curtailment/postponement of their current or lower level needs so as to meet their future or higher level needs.
In my experience as a banker, it has been my understanding that fewer bankers tend to remember their sacred obligation to the SAVERS as well as Users of the Money.
RBI needs to revisit the extant guidelines as well as the compliance thereon on ensuring that the bankers do not forget/ignore their paramount obligation.
Moneylife.in had posted my article on need for a regulator for unclaimed deposits in April 2013. Excerpts:
"The huge accumulations under ‘unclaimed’ category points to the fact that the existing machineries for handling grievances relating to payment of dues and claims are not very effective.
In the absence of any power to fix liabilities and give directions, the Ombudsmen or similar arrangements within organisations remain helpless spectators when complaints about non-payment of money from depositors/savers reach them.
It is in the above context that a statutory body to oversee accounting of the so called unclaimed deposits/payments becomes relevant. Such a body should be made responsible to:
• Track unclaimed deposits with organisations,
• Monitor timely repayment of public funds collected, as in the case of Sahara Corporations,
• Audit accounts of maturity proceeds of policies, deposits, accumulated balances in provident/pension funds remaining undisbursed beyond a reasonable period,
• Receive and handle claims from public relating to such deposits/balances and
• Coordinate among various agencies and government departments for achieving these objectives."